Politics & Policy

Trashing the Job Makers

The Obama administration's tax-talking frenzy has left business owners feeling uncertain.

A year ago Barack Obama inherited a recession brought on by financial panic following the collapse of the housing bubble. The market crash was made worse by Wall Street shenanigans and recklessness at Freddie Mac and Fannie Mae. Job losses followed.

In response, Obama pushed through a stimulus bill that went well beyond the borrowing done by George W. Bush in his last months in office. In fact, Obama and the Congress borrowed an additional $787 billion to infuse the economy with fresh job-creating cash.

The president warned us that without this borrowing, unemployment might reach double digits. Yet with the stimulus, unemployment has soared from 7.6 percent to 10 percent. That translates into over 4 million jobs lost in 2009 alone.

In reaction, an embarrassed administration continues to cite hypothetical jobs saved, rather than the actual number of jobs lost this year. Just this week senior White House adviser Valerie Jarrett, press secretary Robert Gibbs, and senior White House adviser David Axelrod variously claimed “thousands and thousands,” “1.5 million,” and “2 million” jobs saved. If the White House insiders can’t get their theoretical numbers straight, how can anyone else?

Why the continual job losses?

First, the government can create only so many jobs by borrowing and spending. It is less efficient than private enterprise in reacting to market needs — new products, new services, and new consumer tastes. Higher federal budgets eventually translate into more bureaucrats to shackle the private sector with more regulations that discourage innovation and experimentation.

In contrast, the U.S. Small Business Administration claims that small businesses employ about half of all working Americans. Yet building contractors, orthodontists, local real-estate agents, and small software companies (to name just a few types of small businesses) in the last year have not been convinced that it is time to start buying new equipment and hiring more employees to gear up for increased consumer demand.

Why the continued depression among employers?

Many may suspect that the administration does not appreciate how hard it is to be self-employed — an understandable conjecture when neither the president nor many in his cabinet have had careers outside government or academia. Tenure and near-automatic annual pay raises do not exist in the worlds of the insurance agent, farmer, or trucker.

Instead, when employers listen to the president’s grand ideas for health-care reform, they must quietly cringe at increased costs per worker. When they hear soaring rhetoric about cap-and-trade energy policy, they must silently fear higher power costs.

Worse still has been the promiscuous talk this past year about all sorts of higher taxes.

During the 2008 campaign and the president’s first year, we heard Obama promise new income taxes that would revert to the higher rates of the Clinton administration. But that would now come on top of recent tax hikes by the states, many of which have upped their own income and sales taxes by considerable margins since 2000.

During the health-care debate, there were also promises of a special surcharge on “Cadillac health plans,” as well as making the upper brackets pay a surcharge to fund the care of others.

And don’t forget Obama’s inheritance-tax proposals that would have reversed the scheduled one-year repeal (which many expected would become permanent) of the inheritance tax and put a 45 percent tax rate on anything that an individual leaves to his heirs beyond $3.5 million in value — capital that was already taxed during its acquisition.

As a result of all this tax-talking frenzy, business owners have no idea what their new aggregate tax obligations will be or when they will kick in. They can only sense that the Obama administration wants to go after successful entrepreneurs to fund more federal entitlement for others — as if the 5 percent of Americans who fork over 55 percent of the aggregate income-tax revenue didn’t pay enough already.

If President Obama really wants to foster job growth, he needs to get specific. Stop the borrowing and instead tell the business community exactly what income, payroll, and surcharge taxes he proposes, when they will begin — and how much he appreciates those who will pay them.

When it comes to creating a psychological climate that encourages employers to start hiring again, a little certainty and a little praise are a lot better than uncertainty and talk of taxing even more those who already pay the most.

Victor Davis Hanson is a senior fellow at the Hoover Institution, the editor of Makers of Ancient Strategy: From the Persian Wars to the Fall of Rome, and the author of The Father of Us All: War and History, Ancient and Modern.

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